The UK court recently considered the extent of s236 Insolvency Act 1986 (“IA 1986”) in the case of Re Comet Group Ltd (in liquidation); Khan and others v Whirlpool (UK) Ltd and another [2014] EWHC 3477 (Ch).
The Court was asked to consider (1) whether it had jurisdiction to make an order for delivery up of information/documents sought by the Liquidators of Comet Group Ltd (In Liquidation) against Whirlpool (UK) Ltd and Embraco Europe Srl (together, the “Respondents”) pursuant to section 236 IA 1986 and (2) if the Court had jurisdiction, whether it should exercise its discretion in favour of the Liquidators.
Section 236 allows the Court to order that any books, papers or records in a party’s possession or control relating to the business, affairs or dealings of an insolvent company shall be delivered up to the officeholder.
The Court held that an application under s236 must set out the requests for information and documents with as much precision as possible. The Court considered the provisions of section 236(3) and held that it had no jurisdiction to order the supply of information (as opposed to documents) other than through a summons to appear, interrogatories or the submission of affidavits and as such, it was necessary that a request by liquidators for “data” should be more clearly described as “documents containing data”.
In addition, the Court considered various challenges to the application, including the point that a s236 application should not be used to give the officeholder an unfair advantage in other litigation against the party from whom the information/documents are required. In Comet, the Court found that as one of the Respondents had already confessed wrongdoing in respect of ongoing litigation, the only advantage to the Liquidators was acquiring early sight of documentation relevant to that ongoing litigation, which the Court considered was not sufficient to be unfair and may lead to a saving of costs.
Considering all the circumstances and being mindful not to impose an unjust burden on the Respondents, the Court held that it was appropriate that the Respondents provide the Liquidators with the documentation sought, subject to the Liquidators confirming a variation to the order which was originally requested (order amended so as to seek documentation containing the sales and other data – which would then bring the request within the Court’s jurisdiction). The Court concluded that the benefit to the Liquidators in obtaining the information requested significantly outweighed the burden imposed on the Respondents in being ordered to provide it.
This case is relevant to office holders as it offers guidance on s236 applications and highlights the need for accuracy when drafting an application as to the relief sought to make certain that it falls within the Court’s jurisdiction. It is a well-established position that the Court will not generally tolerate a “fishing expedition” and this case emphasises the requirement that s236 applications must be as explicit as possible as to the categories of documents and information sought.
